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Reflections on Smaller Scale Cattle Feeding: Part 2

Methods of Procurement, Dangers in Inertia, What Feeders Want

Our last column discussed the factual givens in our industry plus one suggested approach smaller feeders could investigate to participate in AMAs. This second and final part covers some other perspectives from the viewpoint of smaller feeders.

There is another key complaint of the Northern feeders, that is partially related to the above. They state unequivocally that they do not see the formula offers -- either at all or at the same price levels -- that the Southern feeders do. Part of that is likely chicken and egg stuff -- deliver me the numbers and I’ll show you the money -- but they also feel equivalent quality of cattle don’t get the same money. The packers and the Northern feeders would do well to sit down and thrash some of that out.

There are some related questions to the quality discussion, like, today’s world of more consistent cattle, how necessary is it to go see every pen of cattle, once a feeder has established some record with several packers. Northern feeders struggle with getting a packer buyer to come see cattle in person and that involves logistics and volume again. But in the 21 st century, when doctors are seeing patients on phone screens and computer screens, are there some things that could be worked out?

We remember the first video auctions of feeder cattle by satellite over poor resolution monitors set on folding tables 20-30 years ago. How much is a real problem and how much is cattle industry inertia ? There are thousands and thousands of fed cattle in smaller yards that get few or no looks at all. Is that good for the industry?

The smaller Northern feeders have been frustrated for some time, feeling they are not getting a fair shot at the market, even though by default, they tend to set the cash price. That frustration is what is putting on the pressure for a desperate Hail Mary -- legislation.

One of our Northern feeders put it this way:

“Capitalism and competitive spirit is spurred on by the opportunity to play at a fair poker table while accepting the cards we are dealt,” he wrote. “The ability to have equal access to all marketing options including AMA's and leveling the burden of how we maintain our cash negotiated trade across the regional boundaries of our industry, seems like a reasonable expectation in a "free market" economy. The ability to access all marketing methods should not be limited by geographic location or economies of scale of the feedlot, realizing that that is easier said than done.”

Hopefully, fairer access can be created in a culture that believes in the virtues of its industry as a whole, he added.

He also thinks going down the government mandate road will fail.

The smaller feeders are at a disadvantage and the industry needs to decide if there is value in offsetting some of that disadvantage to keep the smaller operators more competitive. He further pointed out that the major difference -- and some would say advantage -- that the cattle industry has compared to pork and chicken, is the wide geographic dispersion of our ranching and farming supply chain. But that geographic and size dispersion puts those producers in a political back seat regarding industry decisions.

But this Northern feeder is concerned that “kicking the can down the road” this summer risks politicians bowing to pressure and permanently wrecking our industry this fall.

He strongly emphasized that the Koontz information and options should not be wasted but acted upon by the industry to head off government intervention.

“The cash negotiated trade has the attention of the power in Washington. What we choose to do about it will change our future forever,” he said.

There might be some benefit in attacking our problems if we look at AMAs from the other end of the gun barrel, so to speak.

“To be fully transparent, please calculate the $25-40 disadvantage borne by all cattle not marketed through said AMAs …Lack of adoption of AMA’s was not an economic choice,” but the non-existence of the chance for smaller feeders to participate to meet the volume requirements of bigger packers.

He went on to say he doesn’t believe most Northern feeders would prefer government intervention other than as a last ditch effort to survive. He is also “not an advocate for socialist redistribution of wealth” just to appease the disgruntled among us. But without the opportunity to use something like AMAs for smaller guys, “there is the appearance that the industry is just fine with the current trend of market access disparity .”

When I was a kid, the Cincinnati Union Stockyards was still in operation. A person couldn’t just take a critter to the yards to sell on your own. You had to assign it to a commission company, of which there were several, and they handled the sorting and selling for you, for a commission.

If the industry can’t figure out some methods for bolstering the cash market, we might be headed for something similar for fed cattle nationally. Here’s why we’re wondering that.

Our Northern cattle feeder, thinking out loud, poses the question, if we can’t or won’t fix the cash market, is there a chance we’re “barking up the wrong tree” to attempt it? If Northern or any regional small producers could put together cooperative ventures to assemble enough volume of quality cattle to do AMAs with packers, would they simultaneously figure out a way to make money, survive and “bury” the cash market for good? Would desperation yield permanent change?

That is an evolution of thought.

Another Northern feeder mused that the AMAs must be a good deal if the Southern feeders want to keep them so bad. But he has never been offered any formula pricing.

So, you all have had the chance to digest Stephen Koontz’s facts and figures. Now you’ve read some heartfelt thoughts from a couple Northern smaller feeders.

Is it time to sit down somewhere (s) soon and try to start solving some problems?

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